5 questions with Michael Butler

Michael Butler, chairman and CEO of Seattle-based investment bank Cascadia Capital, has written a book called Financing the Future and the Next Wave of 21st Century Innovation. The book has been serialized in recent months on peHUB.com, an affiliated website to PE Week.

Butler, who co-founded Cascadia Capital, previously was managing director at Lehman Brothers, where he was responsible for global equity sales and equity syndication. He recently sat down with PE Week Editor-at-Large Dan Primack to talk about his book and the financial markets.

Q: Why did you write a book?


I was thinking how much the world was starting to change, but that a lot of people in finance were so deep into it that they couldn’t pull their heads up to see.

What’s happened over the last couple of weeks has reinforced that. I don’t think most people on Wall Street—and I have a lot of friends there because I used to work at Lehman—have a sense of just how pissed off Middle America is with them. It’s just a lack of awareness.

Q: Is it a lack of caring or not being smart enough?


It’s not that they aren’t bright, because I think a lot of people on Wall Street are among the brightest in the world. It’s more about being part of groupthink where you can’t see beyond the day-to-day in New York. Warren Buffett has talked about how being in Nebraska gives him a better perspective. Being here in Seattle, I agree with him.

Q: You finished writing your book shortly before Lehman collapsed and filed bankruptcy, let alone all of the subsequent happenings. Is the book still relevant?


I think the fundamental analysis still holds. Some of the things I talked about in the book happened a lot faster than originally contemplated. We’re now seeing restructuring and rethinking that I thought would occur over a period of years happen over a period of months. People are working on the fly.

Q: What is your outlook for the private equity market?


It’s a pretty bleak short-term future. Firms that have capital will have to figure out a different business model, because the highly geared leveraged model will not return any time soon. It just makes no sense for the lenders. All this attention is being paid to banks and similar financial institutions, but hedge funds and private equity funds will go through a similar restructuring.

Q: If so, how does Cascadia Capital survive, much less prosper?


The next cycle will be a lot about growth, and we’re fortunate to have a robust equity business in emerging growth. Value is still important, and we can help buy companies cheap, clean them up and sell them. A lot of the big guys will migrate to growth, both in terms of other regions like Asia and new industries like digital media and cleantech.

I believe the deleveraging process is going to be much deeper and take much longer than conventional wisdom says, but that’s an environment where a firm like ours can still do fine.